Groupon tests out a paid loyalty program

By Zak StamborManaging Editor

Groupon VIP will offer paid subscribers exclusive access to deals.

Groupon Inc. is taking a page from Amazon.com Inc. by offering customers a premium loyalty program.

The program, called Groupon VIP, gives shoppers first shot at deals, access to exclusive offers from businesses that previously ran offers with the daily deal operator, as well as one-click access for requesting a refund for unused vouchers. The program will cost $30 annually, says a Groupon spokeswoman.

Groupon is testing the program in Tampa, FL, with a group of its subscribers who will receive free access to the program for three months before having to decide whether to pay the annual fee.

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Groupon rival LivingSocial rolled out a similar program called Plus last November. For $20 per month Plus members get $25 in “Deal Bucks” credits that are applied to their next purchase, as well as access to closed deals.

Both programs are similar to Amazon.com’s Prime program, says Greg Sterling, founder of Sterling Market Intelligence.

Members pay $79 per year for Amazon Prime, which offers free two-day shipping on Amazon.com and access to the e-retailer’s Instant Video program, which allows customers to watch TV shows and movies on their PCs or mobile devices. Amazon Prime, LivingSocial Plus and Groupon VIP don’t just enable the businesses to capture additional revenue, he says, the programs encourage shoppers to be more loyal.

The success of Groupon's program will hedge on how many loyal shoppers it can attract, he says. “The program will appeal to some people, but the question is, ‘How big is that audience of so-called ‘Groupon addicts?’” says Sterling.

Groupon says that the exclusive deals offered to VIP members will be an “All-Star-like” mix of popular merchants who have previously run offers on Groupon. “We might run 40 or 50 deals in a market like Chicago every day, but if we ran a deal a week ago we aren’t going to run another offer this week,” says the Groupon spokeswoman. “But we might let them run a deal on VIP.”

Groupon has to walk a thin line in offering VIP members access to its best deals, says Sterling. “Many believe there is degradation in the deals that are being offered,” he says. “If Groupon saves its best deals for its most loyal or best customers, which is a logical business strategy, does that have a negative impact on the other stuff? Do you diminish other deals because you’re picking the best fruit for Groupon VIP?”